Greatest investment risks in 2021?

[simoan]

Surely the biggest risk is the unknown unknowns!

Yes, a global pandemic, for instance! How many people saw that one coming this time last year?

Up to a point, Lord Copper.

It was a known - and indeed modelled - risk. The risk was more of a known unknown.

Clearly, given the complete lack of preparedness, awful governmental response and terrible modelling, to all intents and purposes it may as well be an "unknown unknown". The point remains that no-one predicted it in December last year as an event that would take place in 2020 and be a major driver of global stockmarkets.

BTW what's with the Lord Copper reference? Is this a personal comment aimed at me?
Si

[TUK020]

Clearly, given the complete lack of preparedness, awful governmental response and terrible modelling, to all intents and purposes it may as well be an "unknown unknown". The point remains that no-one predicted it in December last year as an event that would take place in 2020 and be a major driver of global stockmarkets.
Si

Do not confuse the disorganisation, ineptitude and willingness to substitute bluster for clear thought within our political classes with the lack of forecasting from qualified and forward thinking individuals and organisations.

a) Bill Gates TED talk 2014
https://www.ted.com/talks/bill_gates_th ... anguage=en

b) Boris Johnson missing the first 5 COBRA briefings on the virus outbreak in the first quarter of this year - presumably because he didn't think his civil servants had any idea on what they should be bringing to his attention as important.

Likewise, when various economic bodies try to forecast the economic impact of Brexit they sneeringly get dismissed by Michael Gove "people have had enough of Brexit". Are you going to call this an unknown unknown in 5 years time?
Just because you can't predict all of the detail doesn't mean you can't see the major salient point of what is coming.

Want a heads up on the next medical disaster that our government is doing nothing about? Antibiotic resistance. Just don't say it is an unknown unknown when any surgery gives worse than a 50/50 chance of death. It may well fix the NHS funding crisis, as no one will want to risk going near a hospital.

Sorry, end of rant

[simoan]

Clearly, given the complete lack of preparedness, awful governmental response and terrible modelling, to all intents and purposes it may as well be an "unknown unknown". The point remains that no-one predicted it in December last year as an event that would take place in 2020 and be a major driver of global stockmarkets.
Si

Do not confuse the disorganisation, ineptitude and willingness to substitute bluster for clear thought within our political classes with the lack of forecasting from qualified and forward thinking individuals and organisations.

a) Bill Gates TED talk 2014
https://www.ted.com/talks/bill_gates_th ... anguage=en

b) Boris Johnson missing the first 5 COBRA briefings on the virus outbreak in the first quarter of this year - presumably because he didn't think his civil servants had any idea on what they should be bringing to his attention as important.

Likewise, when various economic bodies try to forecast the economic impact of Brexit they sneeringly get dismissed by Michael Gove "people have had enough of Brexit". Are you going to call this an unknown unknown in 5 years time?
Just because you can't predict all of the detail doesn't mean you can't see the major salient point of what is coming.

Want a heads up on the next medical disaster that our government is doing nothing about? Antibiotic resistance. Just don't say it is an unknown unknown when any surgery gives worse than a 50/50 chance of death. It may well fix the NHS funding crisis, as no one will want to risk going near a hospital.

Sorry, end of rant

FWIW I am not confused. Unlike many, I had seen the Bill Gates TED talk years ago. I'd also read the Hans Rosling book Factfulness and a global pandemic was one of his main concerns for the future. So I was personally aware of it but no way did I consider it an investment risk in December 2019. And neither did anyone else. That is the only point I am making. This thread only relates to investment risk but you can rant as much as you want as far as I am concerned, even though the mods may feel differently.

Si

[TUK020]

Not in Dec, but first raised on TLF on Feb 5th.
viewtopic.php?f=76&t=21665
Still kicking myself I didn't pay more attention to this

[TUK020]

Further comment, this was visible coming, but I didn't think it through from an investment perspective.
I had thought about it from a work point of view - we were running remote working assessments for our company in Jan.

Taiwan triggered their pandemic emergency response plan on Jan 20th? Death toll 7. Economic impact -no shutdown (don't know the GDP implications).

One of the reasons I read participate in this site is to gain perspective. Many of these sorts of risks are visible, but folks haven't registered them as salient.

btw, "Factfulness" is one of my Christmas presents, yet to read it. Next in the pile after "The Human Body - a guide for occupants" by Bill Bryson which I am currently enjoying

[andyalan10]

Not in Dec, but first raised on TLF on Feb 5th.
viewtopic.php?f=76&t=21665
Still kicking myself I didn't pay more attention to this

That thread puts an interesting perspective on discussing risks for 2021, in particular, the comment from Feb 5th, I think, when the FTSE was at 7482:- The market has moved on from Covid-19, and at the moment those that bought the dip have done best.

And to explain the Lord Copper reference, it comes from "Scoop", and he is the proprietor of the Daily Beast:-

"The phrase, “Up to a point, Lord Copper,” has entered the English language. All employees live in fear of Lord Copper’s whims. No one dares contradict him. For instance:
‘Let me see, what’s the name of the place I mean? Capital of Japan? Yokohama, isn’t it?’
‘Up to a point, Lord Copper.’"

[simoan]

Not in Dec, but first raised on TLF on Feb 5th.
viewtopic.php?f=76&t=21665
Still kicking myself I didn't pay more attention to this

That thread puts an interesting perspective on discussing risks for 2021, in particular, the comment from Feb 5th, I think, when the FTSE was at 7482:- The market has moved on from Covid-19, and at the moment those that bought the dip have done best.

And to explain the Lord Copper reference, it comes from "Scoop", and he is the proprietor of the Daily Beast:-

"The phrase, “Up to a point, Lord Copper,” has entered the English language. All employees live in fear of Lord Copper’s whims. No one dares contradict him. For instance:
‘Let me see, what’s the name of the place I mean? Capital of Japan? Yokohama, isn’t it?’
‘Up to a point, Lord Copper.’"

Thanks for explaining. I am not familiar with the work of Evelyn Waugh and was not aware of this saying. I still don't understand why anyone would feel the need to be reverential towards me though, if that is what is implied by the reference to Lord Copper? I am perfectly happy to admit when I am wrong. If you can''t do that on an anonymous bulletin board you've really got a problem.

All the best, Si

[vagrantbrain]

From the more extreme end, and in no specific order:

1) Bitcoin hits $100,000 before crashing to $100 wiping out loads of amateur investors who bought on the recommendation of some bloke down the (newly reopened) pub. The resulting outrage combined with BLM and XR protests, and demands that "the rich" pay the covid bill, leads to punitive taxes on investing and income.

2) Biden starts a war with Syria/Iran or gets drawn into some regional dustup. In an effort to showcase his green credentials the determination to kill the US shale industry, combined with the closing of nuclear plants, and the realisation that renewables can't make up the shortfall results in the US reverting to being a net buyer of ME oil and getting sucked back in to the regional politics and inevitably taking sides when the next fight starts.

3) At least one major cyber attack that takes down some part of the banking system for a few days and leads to chaos. Tech sector wobbles as other industries realise IT security isn't just another overhead to be reduced or outsourced and they are now very vulnerable as well.

4) Pushback against "big tech" and social media results in silicon valley having a wobble. Mass exodus of skills from California affects the cultures as the companies remaining in CA become evermore more woke (and broke). Silicon Valley mk2 opens up in Texas bringing disruption to the sector.

5) Biden falls of his perch (mentally or physically) leading to the more radical politicians in the US like AOC, Omar and Tlaib taking over.

[UncleEbenezer]

Thanks for explaining. I am not familiar with the work of Evelyn Waugh and was not aware of this saying. I still don't understand why anyone would feel the need to be reverential towards me though, if that is what is implied by the reference to Lord Copper? I am perfectly happy to admit when I am wrong. If you can''t do that on an anonymous bulletin board you've really got a problem.

All the best, Si

Yes, Lord Copper.
Up to a point, Lord Copper.

As with so many phrases that enter the language, my use of the phrase is slightly changed from the original. Not only does it feel less confrontational than "No, you're wrong", it also suggests that while I disagree with your point (what is a known unknown vs an unknown unknown), I'm not dismissing it as downright wrong.

I thought it might've been something we could argue without descending into pantomime. But it's evidently behind me.

[Parky]

From the more extreme end, and in no specific order:

1) Bitcoin hits $100,000 before crashing to $100 wiping out loads of amateur investors who bought on the recommendation of some bloke down the (newly reopened) pub. The resulting outrage combined with BLM and XR protests, and demands that "the rich" pay the covid bill, leads to punitive taxes on investing and income.

2) Biden starts a war with Syria/Iran or gets drawn into some regional dustup. In an effort to showcase his green credentials the determination to kill the US shale industry, combined with the closing of nuclear plants, and the realisation that renewables can't make up the shortfall results in the US reverting to being a net buyer of ME oil and getting sucked back in to the regional politics and inevitably taking sides when the next fight starts.

3) At least one major cyber attack that takes down some part of the banking system for a few days and leads to chaos. Tech sector wobbles as other industries realise IT security isn't just another overhead to be reduced or outsourced and they are now very vulnerable as well.

4) Pushback against "big tech" and social media results in silicon valley having a wobble. Mass exodus of skills from California affects the cultures as the companies remaining in CA become evermore more woke (and broke). Silicon Valley mk2 opens up in Texas bringing disruption to the sector.

5) Biden falls of his perch (mentally or physically) leading to the more radical politicians in the US like AOC, Omar and Tlaib taking over.

Very imaginative. Are you a journalist?

[AsleepInYorkshire]

Would be very interested in this board's view of what are the greatest investment risks on the horizon, and what people are doing to position their portfolios against them.
The biggest uncertainty that I really don't know how to judge is the threat that inflation will take off if pent up demand lets rip in a post vaccine world, and a system awash with monetary stimulus results in rampant inflation.

I'm the biggest threat to my investments. I don't tinker, although I will be realigning this year, the first time in over a decade.

AiY

[scrumpyjack]

Whatever they are, the BoE won’t have thought of them as a possibility. They had not included a global pandemic as a risk previously in their stress tests , in spite of them having occurred in the past

[LooseCannon101]

The greatest risk is believing everything said in the media by so-called experts.

A highly diversified world equity portfolio with minimal fees, kept in a tax-free wrapper and held for the long-term, is IMHO the best way to preserve and grow one's wealth.

[PinkDalek]

Not in Dec, but first raised on TLF on Feb 5th.
viewtopic.php?f=76&t=21665
Still kicking myself I didn't pay more attention to this

There were earlier posts than that one but maybe not investment related per se (mind you, TLF is primarily an investment related website).

For example, viewtopic.php?p=281329#p281329 is dated 31 Jan 2020.

Mind you, I didn't really start tracking until mid February and, in a way, I'm glad as I avoided many of my potential knee jerk reactions. Similarly, for me at least, 2021 is far too short term to worry about, knowing full well I'll take the wrong course if I do too much.

[Steveam]

Lots of good stuff above.

World events maybe beyond the scope of the op or too unspecific but I suspect that China/US/Taiwan could blow-up, Iran/Israel/US seems to be improving, sovereign debt failure by a major western country (Italy?), migration/refugee flows.

Technology/Science/Health issues might include disruptive AI (loss of jobs), cyber attacks, antibiotic resistance, vaccine resistant COVID, climate change, demographics.

Many of these overlap (climate change may cause migration). Some might be beneficial to a mixed and diversified portfolio (demographic changes will drive changes in consumer patterns and behaviours).

So long as the “system” continues roughly unchanged I suspect a well diversified global portfolio will be ok but we each, by our circumstances, have specific risks (mine include very little inflation proofed income, a dependence on U.K.£, social care costs) and we can take some measures to deal with these. (I have a foreign currency commitment which is now matched by a similar income stream).

Best wishes,

Steve

[JohnW]

You might like to view Bernstein's perspective on risks, both deep and shallow. Here's a commentary on the book:
https://awealthofcommonsense.com/2014/0 ... tein-risk/
It's not just next year's risks, it's every years.

[ADrunkenMarcus]

While it is not a specific risk for 2021, over the long term I see a risk to my assets from weakness of the British Pound.

The Pound was $4.03 in 1949 and then devalued to $2.80. It hit significant lows after devaluation in 1967 and then the turbulent 1970s. Although it managed an average closing price of $2 as recently as 2007, that seems to have been an outlier and it is much weaker today, standing at $1.35. Where it will go in the next year or even decade is impossible to predict, however I do see scope for considerable weakening of Sterling either against the US Dollar or other international currencies, particularly with the rise of developing nations and the dynamism of emerging Asia.

For someone of my age, how weak the Pound might be in sixty years is probably too depressing to contemplate. I therefore hold directly a number of foreign shares; investment trusts which are international in focus; and UK shares which, for the most part, have very substantial overseas earnings.

Best wishes

Mark.

[dealtn]

While it is not a specific risk for 2021, over the long term I see a risk to my assets from weakness of the British Pound.

A risk you can easily do something about though (some of which you are doing).

[torata]

From the more extreme end, and in no specific order:

1) Bitcoin hits $100,000 before crashing to $100 wiping out loads of amateur investors who bought on the recommendation of some bloke down the (newly reopened) pub. The resulting outrage combined with BLM and XR protests, and demands that "the rich" pay the covid bill, leads to punitive taxes on investing and income.

2) Biden starts a war with Syria/Iran or gets drawn into some regional dustup. In an effort to showcase his green credentials the determination to kill the US shale industry, combined with the closing of nuclear plants, and the realisation that renewables can't make up the shortfall results in the US reverting to being a net buyer of ME oil and getting sucked back in to the regional politics and inevitably taking sides when the next fight starts.

3) At least one major cyber attack that takes down some part of the banking system for a few days and leads to chaos. Tech sector wobbles as other industries realise IT security isn't just another overhead to be reduced or outsourced and they are now very vulnerable as well.

4) Pushback against "big tech" and social media results in silicon valley having a wobble. Mass exodus of skills from California affects the cultures as the companies remaining in CA become evermore more woke (and broke). Silicon Valley mk2 opens up in Texas bringing disruption to the sector.

5) Biden falls of his perch (mentally or physically) leading to the more radical politicians in the US like AOC, Omar and Tlaib taking over.

Here's another

6) China and India escalate from barbed wire-wrapped clubs and microwaves to tanks and missiles.

torata

[ADrunkenMarcus]

5) Biden falls of his perch (mentally or physically) leading to the more radical politicians in the US like AOC, Omar and Tlaib taking over.

If Biden was incapacitated, I would expect Vice President Kamala Harris to take over.

Best wishes

Mark.